Treasurers bypass banks for direct line to Bloomberg

‘Australia is an important place to be and that’s why we’ve invested in this space,’ Bloomberg chairman Peter Grauer says, referring to the company’s new Sydney headquarters.
AFR

by
Sally Rose

UPDATED |
Bloomberg
is growing its professional subscriptions to government, corporate finance and treasury teams despite the contraction in the global finance industry.

On Monday morning in Sydney, Bloomberg chairman
Peter Grauer
visited the financial media and services multinational’s new Australian headquarters at 1 Bligh Street to address the local team and give an update on how the Australian operation is faring compared with the rest of the world.

“Australia’s doing great," says Grauer. “Particularly well with local banks."

About 18 per cent of Bloomberg’s global business comes from the Asia-Pacific region and it is growing. Global growth in 2012 was 4.5 per cent, compared with 7.5 per cent in the Asia-Pacific.

Westpac Banking Corp
’s chief executive
Gail Kelly
will be the keynote speaker at a cocktail party to officially open the new offices on Tuesday evening.

“Large global banks have been contracting their business with all market data vendors and so we have seen some deterioration in the number of seats [subscribers] in those companies largely as a result of them pulling back to concentrate more on markets where they are more concentrated and have greater scale in their business," Grauer says.

But the Sydney sales team has been making progress on the buy side of the investment banking and investment management communities, as well as increasing market penetration among corporate finance and government finance teams, he says.

About 82 per cent of $US8 billion in total revenue Bloomberg generated in 2012 came from the core business of selling professional subscriptions, Grauer says. The company has adjacent businesses in pay-per-use trading platforms and media.

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Silver lining in the cloud

Most of the growth is being driven by multiple “Bloomberg Anywhere" subscriptions, which gives access to multiple users instead of employees sharing a traditional terminal-based subscription. This is closing the gap between subscribers (315,000) and users (375,000). With both services the same price, $US1 750 per month, the change is increasing profitability.

Traditionally, most of the terminals were occupied by analysts and brokers who sat at them for eight to 10 hours a day, and most of them swapped to the cloud-based service when it was introduced nearly eight years ago.

But with the increasing penetration of mobile devices and tablets more clients are purchasing subscriptions for executives. “Increasingly corporate treasury teams are wanting to access the data directly rather than through their bankers and brokers," says Grauer. Bloomberg has a corporate treasury management system currently under development. It is expected to be launched in late 2014 or early 2015, he says.

Tailoring new data analysis functionality for users working in investment banking, private equity and investor relations is another part of the growth strategy. More than 20 investment banks, primarily in the US and the UK, are being consulted to improve the service.

“The investment banking market is a relatively modest market," says Grauer. ‘"If we were able to generate a couple of thousand professional subscriptions out of it, worth $US40 million in revenues, that would be a very successful initiative for us."

Chairman’s many meetings

After briefing staff, Grauer walked a few blocks to participate in a panel at a NSW Trade and Investment luncheon, following that with a stroll in the Royal Botanic Gardens – Bloomberg is a corporate sponsor – where he inspected a plant specimen collected by Joseph Banks. After talking to Capital he was off to a dinner with a dozen women in business to talk about diversity. On the first day of his two-day visit from New York the chairman had also met with six clients.

Grauer spends about 40 per cent of his time on trips like this visiting places all over the world. He met with more than 600 clients last year.

“Australia is an important place to be and that’s why we’ve invested in this space," he says gesturing to the swanky lift wells shooting through the light-filled atrium. The company boasts that the building “combines leading edge design, technology and sustainability". It currently houses 100 employees, with room to grow.

Bloomberg has 146 bureaus in 72 countries. The Asia-Pacific region is growing at a much faster rate than its other markets.

“Over the past 12 months to February the fastest growing markets in the Asia-Pacific region were the ASEAN countries," says Grauer. “Singapore to a lesser extent because penetration there is already so high. Growth is strongest in the Philippines, Thailand, Malaysia and Indonesia. Growth is slower in China and South Korea. Japan is still growing but it looks like it is at an inflexion point where that is starting to flatten out, depending on how the Abe administration does it might start to pick up."

India is managed out of the Singapore office but measured as a different region, grouped with Pakistan, Sri Lanka, Bangladesh and Nepal. “The business in India actually contracted in 2012 as the equity markets were down dramatically but it is starting to grow again in the first two months of 2013."

Building up the brand

Although media publishing accounts for a small percentage of Bloomberg’s business it is very competitive at it and the chairman has often been quoted as saying that the company has an ambition to be the “most influential news organisation in the world of business and finance".

But he ruled out further acquisition plans in the publishing industry.

In September 2009 the company acquired the magazine now titled Bloomberg Businessweek. “That acquisition has met expectations, certainly from an editorial point of view it is a much more relevant publication today than it was when owned by McGraw Hill," Grauer says.

Editorial objectives are not synonymous with commercial objectives. "Bloomberg is in a position where it is large enough to absorb some operating losses in businesses which help continue to build the brand and level of influence around the world.

“With roughly 900, 000 subscribers and about 4.7 million additional readers each week, it is helping achieve the objective of getting the Bloomberg brand in front of more influencers in the world of business and finance."

A Chinese edition of Bloomberg Businessweek is published and the company has joint ventures with television partners in a number of markets including Indonesia, Mongolia, Turkey, India, the Middle East, Brazil and the Netherlands. The company also syndicates selected stories by the journalists who write for its subscribers globally. But Grauer does not see opportunities for Bloomberg to expand its media interests in developing economies.

“I don’t know how it is in Australia but these [media publishing companies] are hard businesses."